Meriden Firm Disputes Action By Sba

November 15, 1994|By AMANDA GILL; Courant Correspondent

MERIDEN — A company that has been having financial troubles for more than a year is accusing a federal agency of bad faith on a loan, and has enlisted the help of U.S. Rep. Gary A. Franks, R-5th District, to resolve the situation.

``There are state and federal laws that require people in this capacity to act in good faith,'' Peter Quinlan, one of the owners of Quinlan's Lumber and Home Center, said Monday.

The 48-year-old, family-run business first encountered financial troubles in 1990, when it bought a vacant foundry on Cross Street and embarked on a more than $300,000 renovation of the building and an environmental cleanup, Quinlan said.

Several businesses rent space from the Quinlan family on the site; the lumber company itself continues to be run from a location on Camp Street.

In an effort to ease the debt, the company in 1993 applied for a $250,000 loan from the Connecticut Development Authority, which is part of the state Department of Economic Development. The application was part of a $600,000 loan package Quinlan's hoped would be approved through People's Bank. The money would have been used for working capital, to buy inventory and to restructure the company's debt.

To win approval for the plan, Quinlan's asked the Hartford office of the U.S. Small Business Administration to subordinate its claims on the company's real estate assets for a previous $100,000 loan. Quinlan said the SBA had, at first, agreed to the proposal because it already had a lien against the company's business assets.

``The SBA agreed to take a back seat on the real estate -- the buildings and property -- and look to their first position on our business assets, the inventory,'' he said.

Several weeks later, however, Quinlan said the SBA reneged on the agreement, causing the company to lose the state and People's Bank loans in July 1993. That led to a property auction in September 1993 at which the SBA bought the Quinlan's property on Camp Street.

``They're running us into the ground by virtue of the fact that they took our property, which is our prime collateral for any type of future loan or financing,'' Quinlan said.

The company continues to operate, but has had no contact with the SBA regarding rent payments.

Quinlan said the SBA's refusal to subordinate its loan interests and its subsequent purchase of his company's property at auction were part of an attempt to hide the lapsing of a lien the agency had had against Quinlan's business assets. Without the lien, the SBA would have lost its priority status in any claim on Quinlan's, which is why the agency pursued the property in auction, Quinlan said.

David Turrill, a loan officer with the Hartford office of the SBA, declined to comment on the situation Monday.

Harold Pitt, an SBA attorney, confirmed Monday that the lien against Quinlan's had lapsed, but declined to comment further pending a written statement scheduled to be released later this week.

Quinlan said the lapse of the SBA lien in 1990 was discovered in January of this year. Since then, Quinlan's has been working with Franks' aides to resolve the situation.

Steve Dackson, a member of Franks' staff working on the matter, could not be reached for comment Monday.

``We've had two meetings in Washington with the SBA,'' Quinlan said. ``The first one didn't go well. At the second one, they agreed to investigate but the results were totally unsatisfactory.''

Quinlan said the investigation conducted by SBA officials did not address the issue of whether the Hartford office had acted ethically.

``They did not act in good faith and Washington wouldn't address that,'' he said.

Quinlan said Franks' office is trying to arrange a third meeting with SBA officials. If that meeting fails to resolve the situation, Quinlan said, he will go forward with the lawsuit.